“This agreement…strengthens the platform for Nine Entertainment’s growing digital video business and ultimately allows us to control 100% of our digital future,” Nine Entertainment Chief Executive Officer David Gyngell said in a statement.

Nine agreed to pay around 40 million Australian dollars (US$37.9 million) for the stake, a person familiar with the matter said. Nine will continue to be Microsoft’s Australian media partner, the company said in a statement.

Mi9′s flagship asset is ninemsn.com.au. The group’s news sites reached a combined 2.9 million unique viewers in August, according to Nielsen.

Nine has endured some tough times since forming the Mi9 joint venture with Microsoft in 1997.

In 2006, Publishing & Broadcasting Ltd., a company backed by billionaire James Packer, sold 50% of Nine to private-equity firm CVC Capital Partners for A$4.5 billion. CVC bought the rest of Nine, which also owns assets such as ticketing business Ticketek and Sydney’s Allphone Arena, over the next two years.

However, as Nine reached the brink of insolvency, CVC in October last year agreed to a deal that saw Nine’s lenders, including Apollo Global Management LLC, Oaktree Capital Group LLC and Goldman Sachs Group Inc., seize control of the company in a debt-for-equity swap.

Nine plans to close the Mi9 deal ahead of its planned IPO, the proceeds of which will be used to pay down debt, people familiar with the matter said. The targeted size of the IPO hasn’t been determined, but will be at least A$500 million, one of the people said.

That would make Nine’s offering Australia’s largest of the year, ahead OzForex Group Ltd., which raised A$413 million, according to data provider Dealogic. This year, US$1.8 billion has been raised in 25 Australian IPOs, according to Dealogic.

Shares in Nine’s rivals have given mixed performances this year. Seven West Media Ltd. and Ten Network Holdings Ltd., the owners of Australia’s only other two commercial free-to-air television networks, rose 43% and fell 1.7%, respectively, while the benchmark S&P/ASX200 has risen 12%.

Nine’s owners have hired Commonwealth Bank of Australia, Macquarie Group, Morgan Stanley and UBS as joint lead managers on the listing, and Deutsche Bank AG and Nomura Holdings Inc. have secured co-manager roles, the people said.